Is Intel Stock a Buy After Awful Results?
The technology company Intel reported an awful set of first-quarter results recently, surprising investors and causing analysts to reconsider the stock’s position among other tech giants. Intel has been an iconic brand in the tech industry for many years, but after the uninspiring results, is the stock still a good buy? We take a look.
Intel’s Awful Results in the First Quarter
Intel reported a first quarter revenue of $14.8 billion and profits of $4 billion, which is a 35% decline in year-on-year revenue and a 53% decline in year-on-year profits. On top of this, Intel posted a 19% decline in data center sales as demand for cloud storage and data processing weakened, as well as a 6% decline in personal computer chip sales, as demand from PC manufacturers slumped. Analysts were quick to note that Intel’s guidance for the second quarter did not provide much hope either, with Intel predicting flat to lower revenue and profits in Q2 versus the year-ago period.
What Drove Intel’s Awful Results?
The worsening results posted by Intel can be attributed to several factors, such as:
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Slowing Demand for Computers, Mobile Phones and Other Electronic Devices – The satellite PC market in particular has seen falling demand, leading to vendors such as Lenovo and Dell to reducing their orders with Intel.
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Rising Competition from Other Tech Companies – Intel’s days as the unquestioned leader in computer chip technology and microprocessor development are now over. AMD, the leading rival to Intel in the chip market, is making waves with its new line of Ryzen processors and plans for further investment into chip development. Meanwhile, Intel’s foray into the mobile chip market, making chips for smartphones and tablets, has failed as the company struggles to compete with ARM-based processors from competitors such as Qualcomm and Apple.
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Weak Economy and Sanctions – The United States’ clampdown on trade with China has dealt about 15% hit to Intel’s overseas revenues and caused a lot of uncertainty in the global economy.
Analysts’ Opinions on Intel Stock
In light of the dismal performance in Q1, analysts remain divided on the prospects of Intel’s stock. Let’s take a look at what they have to say:
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Positive View – There are some analysts who are optimistic on the prospects of Intel’s stock. Goldman Sachs stated that Intel could still benefit from the growing interest in data servers and 5G connectivity in the second half of this year. Other analysts note that Intel is still well positioned to capitalize on the greater demand for cloud computing and AI applications.
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Negative View – At the same time, Citigroup thinks that Intel’s first-quarter revenues and profits may have marked a peak in the company’s financial performance. Analysts from Morgan Stanley feel that Intel’s days of undisputed domination in the PC chip market are coming to an end and there could be further downward pressure on chip prices as competition increases in the space.
Is Intel Stock Still a Buy?
It’s understandable that investors are now left wondering whether Intel’s stock is still a recommended buy. Here are a few points to consider for anyone interested in investing in Intel:
Pros
a. Intel is still the leader in the PC chip market, with a strong position in cloud computing and artificial intelligence.
b. Intel is pushing the boundaries of chip performance with its new line of 10nm chips, offering much faster speeds at lower power levels.
c. Intel is a global leader in data center operations, with revenues in this area expected to remain robust in 2020.
Cons
a. There are rising competitors in the PC and mobile chip markets, making Intel’s market share increasingly precarious.
b. Intel’s venture into newer technologies such as AI and autonomous driving has not been overly promising so far.
c. Intel’s monopoly in this space is slowly dwindling, with some companies preferring to go with rivals such as AMD and ARM.
Intel may still have a long road ahead to ensure a successful 2020, given the disappointing performance in the first quarter. Despite that, Intel is still a giant in the tech space and the current dip in the stock price could be an interesting opportunity for investors looking for a long-term value play. Those who are confident on Intel’s vision going forward should consider buying the stock, however, potential investors must weigh their risk appetite before making a decision. Ultimately, it is up to the individual investor to determine whether Intel’s stock is a buy.
